An Introduction to Opportunity Cost
As you can see through the examples in this lesson, some decisions have small or inconsequential opportunity cost and some, like whether to go to college or not, have significant opportunity costs, no matter which decision you make. Whichever choice you settle on depends entirely upon the goals you are aiming to achieve.
Understanding opportunity cost helps us make decisions by knowing what we are gaining and what we are giving up. Be sure to review the summary points of this lesson before moving on.
- Opportunity cost is the value of the alternative you didn't choose; it's the next-best alternative. Click here if you'd like to review further.
- Every decision has an opportunity cost. Click here if you'd like to review further.
- Opportunity cost is not an amount of money; instead, it is the value of that money as determined by the goods and services that can be bought with the money. Click here if you'd like to review further.
- Not understanding opportunity cost will cause you to make decisions without being aware of what you have given up along the way. Click here if you'd like to review further.